CASE NO. M-14 | Central Board of Assessment Appeals

Republic of the Philippines

CENTRAL BOARD OF ASSESSMENT APPEALS Manila

TAGANITO MINING CORPORATION AND HINATUAN MINING CORPORATION,
Petitioners-Appellants,

– versus –

PROVINCIAL ASSESSOR OF SURIGAO, DEL NORTE,
Respondent-Appellee,

CBAA CASE NO. M-14 Re: TD Nos. 8255 to 8330
& 5941 to 6007 Province of Surigao Norte

– and –

LOCAL BOARD OF ASSESSMENT APPEALS OF SURIGAO DEL NORTE,
Appellee.

x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

D E C I S I O N

It appears from the records that Respondent Provincial Assessor assessed

TAGANITO MINING CORPORATION’s dumptrucks, bull-dozers, payloaders, etc.

as real properties located at its mine site at Barangay Taganito, Municipality of

Claver, Province of Surigao del Norte under Tax Declaration Nos. 8255 to 8330

and HINATUAN MINING CORPORATION’s similar properties located in its mine

site at Hinatuan Island, Barangay Talavera, Municipality of Tagana-an, Province

of Surigao del Norte under Tax Declaration Nos. 5941 to 6007.

Respondent Assessor based his assessments on Sec. 199(o) of R.A.

7160, otherwise known as the Local Government Code of 1991. For its part, the

Local Board of Assessment Appeals of the Province of Surigao del Norte upheld

the stand of Respondent Assessor.

Hence, Petitioners-Appellants filed this instant appeal on July 23, 2001.

The sole ground of appeal by Petitioners-Appellants is “THAT THE

HONORABLE LOCAL BOARD ERRS IN RULING THAT MOBILE EQUIPMENTS

SUCH AS DUMPTRUCKS, BULLDOZERS, EXCAVATORS, PAYLOADERS,

ERC. ARE REAL PROPERTIES THUS SUBJECT TO REAL PROPERTY TAX.”

Reference: Book X, pp. 233-244

Respondent-Appellee Provincial Assessor of Surigao del Norte did not file

an Answer to the instant petition. Instead, he filed with this Board copies of his

Answer and Memorandum submitted to the Local Board of Assessment Appeals

of Surigao del Norte.

In his said Answer, Respondent Provincial Assessor alleged:

(1) that the petition of Petitioner Hinatuan Mining Corporation with the

Local Board was filed beyond the reglementary period prescribed under Section

226 of the Local Government Code of 1991;

(2) that the petition should not be entertained for failure of taxpayer to

first pay the tax as required by the provisions of Section 252 of the same Code;

(3) that the provisions of Section 199(o) of R.A. 7160 was very clear as

to preclude any resort to Article 415 of the New Civil Code;

(4) that subject properties were not among those exempted from

payment of the real property tax as enumerated under Section 234 of R.A. 7160;

and

(5) that, “per verification made by Respondent from the Land

Transportation Office, this city, subject machineries were not registered in their

office and so, said dumptrucks, etc. cannot be used outside/beyond the

company’s jobsite. This fact gives us more reason to believe that said

machineries are actually, directly and exclusively used right in their area of

operation by the herein Petitioner Company.”

The Local Board did not touch on the issue of the reglementary period of

sixty (60) days under Section 226 of R.A. 7160, nor did Respondent Provincial

Assessor pursue his point.

On the matter of the requirement of Section 252 of R.A. 7160, the Local

Board ruled that the appeal was a “prejudicial question” which was to be decided

first before payment of taxes is required. No objections were heard from

Respondent Assessor.

Reference: Book X, pp. 233-244

Respondent Provincial Assessor relied on the definition of “Machinery” as

real property under Section 199(o) of R.A. 7160. We would have agreed with

Respondent Assessor since, as stated by the Supreme Court in Standard Oil Co.

of New York vs. Jaramillo, 44 Phil. 630, “it is a familiar phenomenon to see things

classified as real property for purposes of taxation which on general principle

might be considered personal property.” Also, we said in MSIC vs. Board of

Assessment Appeals and Provincial Assessor of Laguna (CBAA Case No. 61,

May 26, 1976), that “since the law on real property taxation enumerates what are

real property for purposes thereof, there is no justification to resort to the Civil

Code.”

However, the definition of “machinery” as real property under Section

199(o) of R.A. 7160 is so vague, ambiguous and sweeping as to include all

things which are actually, directly, and exclusively used to meet the needs of that

particular industry, business or activity and which, by their very nature and

purpose, are designed for, or necessary to its manufacturing, mining, logging,

commercial, industrial or agricultural purposes. Therefore, we find it compelling,

necessary and proper to resort to the legislative intent behind Section 199(o) of

R.A. 7160.

Hereunder are quoted the proceedings found on pages 414 to 416 of the

Journal and Records of the House of Representatives Proceedings and Debates,

4th Regular Session 1990-1991, Volume Two (September 4 – November 6,

1990), viz:

“CONSIDERATION OF H.B. No. 31046 (Local Government Code) Continuation

PERIOD OF SPONSORSHIP AND DEBATE

MR. DEL MAR. Mr. Speaker, I move that we continue the consideration of House Bill No. 31046 submitted jointly by the Committee on Local Government, the Committee on Appropriations, and the Committee on Ways and Means, the title of which I request the Secretary to read.

THE PRESIDING OFFICER (Mr. Matti). Is there any objection? (Silence) The Chair hears none; the motion is approved.
The Secretary is directed to read the title of the bill.

Reference: Book X, pp. 233-244

THE SECRETARY. House Bill No. 31046, entitled AN ACT PROVIDING FOR A LOCAL GOVERNMENT CODE.

MR. DEL MAR. Mr. Speaker, the parliamentary status of the measure is that it is under the period of sponsorship and debate and I ask that the Gentleman from Antique, the Honorable Exequiel Javier be recognized to continue sponsorship of the measure.

SUSPENSION OF SESSION

THE PRESIDING OFFICER (Mr. Matti). With leave of the House, the session is suspended.

It was 6:04 p.m.

RESUMPTION OF SESSION

At 6:05 p.m. the session was resumed.

THE PRESIDING OFFICER (Mr. Matti). The Acting Floor Leader is recognized.

SUSPENSION OF SESSION

THE PRESIDING OFFICER (Mr. Matti). The session is resumed. The distinguished Gentleman from Antique is hereby recognized.

MR. JAVIER (E.). Thank you, Mr. Speaker.

MR. DEL MAR. Mr. Speaker, may I ask also that the Gentleman from Quezon City, the Hon. Antonio Aquino, be recognized to continue his interpellation of the sponsor.

THE PRESIDING OFFICER (Mr. Matti). The Gentleman from Quezon City is hereby recognized to continue his interpellation of the sponsor.

MR. AQUINO (A.). Thank you, Mr. Speaker.
Mr. Speaker, to continue with the interpellation, may I refer the honorable sponsor to page 147 of Book II. On Item 13, under the title “machinery,” this Representation believes that the definition of machinery here for purposes of appraisal and assessment of real property for taxation should include movable machines but immovable by destination or purpose or for purposes of taxation to cover sewing machines, forklifts, cranes, bulldozers, and similar equipment as falling under the purview of the coverage of machinery as has been defined?

MR. JAVIER (E.). Mr. Speaker, this provision involves real property taxation and, therefore, the taxation should only be limited to real properties. Movable machines like sewing machines, bulldozers could not be classified as real property if they can be mobilized or can be moved from place to production or from the place of activity. But there are some machines, defined under the Civil Code, which are considered as real property by destination, Mr. Speaker.

MR. AQUINO (A.). Yes. That is what this Representation was referring to. That is why we specifically mentioned sewing machines, forklifts, cranes, bulldozers, and similar equipment which under the Civil Code are really defined as movable machines but immovable by destination or purpose.

MR. JAVIER (E.). We are trying to preserve the definition of real property, Mr. Speaker, under the Civil Code. And that is the definition that we have used here in defining machinery as real property. Therefore, if we accede to the request of the honorable Gentleman from Quezon City, what will happen is all types of movables will be taxed as real property, and where do we stop, Mr. Speaker.
So, Mr. Speaker, I do not think we can agree on a redefinition of machinery as real property under this provision because if we agree, what will prevent, let us say, the assessors from taxing movable equipment or property although they are not really real property? This will give the assessors discretion, Mr. Speaker. If we give these functionaries so much discretion, we will be giving

Reference: Book X, pp. 233-244

them the opportunity for graft. So we have to stick by the definition under this provision, Mr. Speaker.
Before the honorable Gentleman from Quezon City proceeds to his next question, Mr. Speaker, may I request that the Chairman of the Committee of Local Government be recognized. He has some important announcements.

THE PRESIDING OFFICER (Mr. Matti). The chairman of the Committee on Local Government is hereby recognized.

MR. MARTINEZ. Thank you, Mr. Speaker.
Mr. Speaker, I would like to propose a timetable wherein we will have the schedules for the interpellation and for the period of amendments so that we can finish, as promised by the leadership of this House, the Local Government Code by the end of this year, Mr. Speaker.

THE PRESIDING OFFICER (Mr. Matti). What does the Committee on Rules say?

MR. DEL MAR. The chairman will still give the schedule of the committee discussions on the Local Government Code.
Can we hear first the sponsor.

THE PRESIDING OFFICER (Mr. Matti). The chairman may proceed.

MR. MARTINEZ. Thank you, Mr. Speaker. The following is the proposed timetable: on October 10 and 11, that will be today and tomorrow, we will close the debate on Book II; on October 15, Monday, we will start with Book III; on October 16, Tuesday, we will have Book IV; on October 17 and 18, Wednesday and Thursday, we will be presenting the committee amendments; on October 22 to 26, we will have the individual amendments and the approval on Second Reading, Mr. Speaker, and then on November 5, we will have the final approval of the Local Government Code.
Mr. Speaker, that is the proposed timetable for the Local Government Code.

THE PRESIDING OFFICER (Mr. Matti). Is the chairman making a motion now?

MR. LAGUDA. Yes, Mr. Speaker.

MR. MARTINEZ. Yes, Mr. Speaker, I move that this timetable be approved.

MR. ANTONIO. Mr. Speaker, I have a reservation on the timetable.

THE PRESIDING OFFICER (Mr. Matti). The Gentleman from South Cotabato is recognized.

MR. ANTONIO. Mr. Speaker, on this schedule being proposed by the honorable chairman, I had reservations also to interpellate or have clarificatory questions on Book I. May that also be taken on Monday after we take Book II?

MR. MARTINEZ. We can still take Book I during the committee amendments, Mr. Speaker.

MR. ANTONIO. These are clarificatory interpellations, Mr. Speaker, based on my amendments.

MR. MARTINEZ. We will have the clarificatory discussions during the period of committee amendments, Mr. Speaker.

MR. ABAYA. Parliamentary inquiry, Mr. Speaker.
Did I hear the Gentleman from Cebu right, Mr. Speaker, when he said that only one day was allotted for Book III and another day for Book IV?

MR. MARTINEZ. Yes, Mr. Speaker, because I would like that the committee amendment be first presented because there are some committee amendments which answer some of the questions.

Reference: Book X, pp. 233-244

MR. ABAYA. Nonetheless, may we propose that each book be given at least two days for debate, Say, Book III, Monday, Tuesday, Book IV, Wednesday, Thursday and the proper adjustments can be made somewhere.

THE PRESIDING OFFICER (Mr. Matti). What does the chairman say?

SUSPENSION OF SESSION

MR. MARTINEZ. May we request a suspension, Mr. Speaker?

THE PRESIDING OFFICER (Mr. Matti). The session is suspended.

It was 6:15 p.m.

RESUMPTION OF SESSION

At 6:18 p.m., the session was resumed.

THE PRESIDING OFFICER (Mr. Matti). The session is resumed.

MR. MARTINEZ. Mr. Speaker, after consulting with our colleagues, I am formally withdrawing the motion for the proposed timetable. Instead, I suggest that this timetable be accepted by the Rules Committee and that this Local Government Code be the only bill treated for these dates, Mr. Speaker.

THE PRESIDING OFFICER (Mr. Matti). What does the Committee on Rules say?

MR. DEL MAR. Mr. Speaker, the Committee on Rules has not been able to meet on this matter yet, since it was just brought up now by the Committee on Local Government. But I assure the chairman that in tomorrow’s meeting, we will take up this request of the committee and I see no reason why the Committee on Rules will not follow the schedule recommended by the committee.

THE PRESIDING OFFICER (Mr. Matti). Is that acceptable to the proponent of the timetable?

MR. MARTINEZ. So it is understood that tomorrow, upon start of the session, we will take up the Local Government Code right away?

THE PRESIDING OFFICER (Mr. Matti). The Rules Committee will consider the proposal and will report to the House tomorrow after the start of the session.
The Gentleman from Quezon City may continue his interpellation of the Gentleman from Antique.

MR. AQUINO (A.). Thank you, Mr. Speaker.
Mr. Speaker, with the clarification made by the honorable sponsor as to the contemplation of the Civil Code in defining movable machines, but immovable by destination or purpose, this Representation will desist from further discussing this issue.”

It is clear from the words of Congressman E. Javier that Congress wanted

to confine the definition of “machinery” (as real property under Section 199(o) of

R.A. 7160) within the meaning of Article 415 of the New Civil Code, thus:

“MR. JAVIER (E.). Mr. Speaker, this provision involves real property taxation and, therefore, the taxation should only be limited to real properties. Movable machines like sewing machines, bulldozers, could not be classified as real property if they can be mobilized or can be moved from the place of production or from the place or activity. But there are some machines, defined under the Civil Code, which are considered as real property by destination, Mr. Speaker. (Underscoring supplied)

Reference: Book X, pp. 233-244

Article 415 of the New Civil Code provides as follows:

“Art. 415. The following are immovable property:
“(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
“(2) Trees, plants, and growing fruits, while they are attached to the land or form an integral part of an immovable;
“(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object;
“(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner of the immovable in such a manner that it reveals the intention to attach them permanently to the tenements;
“(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works;

“X X X”

On the other hand, Section 199(o) of the Local Government Code of 1991

provides thus:

“(o) “Machinery” embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installations and appurtenant service facilities, those which are mobile, self-powered or self-propelled, and those not permanently attached to the real property which are actually, directly, and exclusively used to meet the needs of the particular industry, business or activity and which by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes;”

Section 199(o) of R.A. 7160 seems to convey that all things “which are

actually, directly, and exclusively used to meet the needs of the particular

industry, business or activity and which by their very nature and purpose are

designed for, or necessary to its manufacturing, mining, logging, commercial,

industrial or agricultural purposes” should be considered “machinery” for

purposes of the real property tax. On the other hand, Article 415 of the New Civil

Reference: Book X, pp. 233-244

code provides that, in order for an apparently movable equipment to be

“immovable”, the intention of the owner thereof to make that equipment

“immovable” must be manifest.

Dumptrucks or haulers are similar in nature to delivery trucks and yet the

latter are never considered real property for purposes of the real property tax.

Not all things which are actually, directly and exclusively used to meet the needs

of a particular industry, business or activity are considered real property for

purposes of the real property tax. Adding machines and calculators, for example,

are always necessary to any kind of business, yet they are not subject to the

payment of real property tax.

Centralized airconditioning systems have the same functions as window-

type airconditioning units and yet the latter are never considered as real property

for purposes of the real property tax because window-type airconditioning units

could be moved from place to place, while centralized airconditioning systems

could not be.

Respondent Assessor said that subject properties were not among those

exempted from payment of the real property tax as enumerated under Section

234 of R.A. 7160. Of course, they are not among those listed as exempted from

payment of the real property tax, for the simple reason that they are not real

properties in the first place.

Respondent Assessor also said that, “per verification made by Respondent

from the Land Transportation Office, this city, subject machineries were not

registered in their office and so, said dumptrucks, etc. Cannot be used

outside/beyond the company’s jobsite. This fact gives us more reason to believe

that said machineries are actually, directly and exclusively used right in their area

of operation by the herein Petitioner Company.”

To this, we say that Respondent Assessor himself correctly quoted

Sections 3(a) and 5 of R.A. 4136, otherwise known as the Land Transportation

and Traffic Code: only motor vehicles using any public highway of the Philippines

Reference: Book X, pp. 233-244

shall be registered as such. The vehicles in question could be transferred from

place to place on board another conveyance which may be registered with the

Land Transportation Office. Beside, non-registration does not convert a personal

property, such as dumptruck, into a real property for purpose of the realty tax.

In view of the foregoing, we find for the Petitioners-Appellants. The

properties in question are personal in nature and, therefore, not subject to

payment of the real property tax. To uphold the contention of Respondent-

Appellee Provincial Assessor would be to give extra wide discretion which could

be used as an avenue for graft. This is precisely what the Congress of the

Philippines seeked to prevent.

WHEREFORE, premises considered, the Order of the Local Board of

Assessment Appeals of May 30, 2001 is hereby SET ASIDE; and the

Respondent-Appellee Provincial Assessor of Surigao del Norte is hereby

ORDERED to cancel, as void ab initio, Tax Declaration Nos. 8255 to 8330 for

TAGANITO MINING CORPORATION’s dumptrucks, bull-dozers, payloaders,

etc., at Taganito, Claver, Surigao del Norte, and Tax Declaration Nos. 5941 to

6007 for HINATUAN MINING CORPORATION’s similar properties at Hinatuan

Island, Barangay Talavera, Municipality of Tagana-an, Surigao del Norte.

Manila, Philippines, May 10, 2002.

(Signed) CESAR S. GUTIERREZ
Chairman

(Signed)
ANGEL P. PALOMARES Member

(VACANT) Member

Reference: Book X, pp. 233-244